The year 2022 may go down in history as the year of peak bearishness on macroeconomic factors as the war in Ukraine rages on, inflation keeps on hiking upwards, followed up by rate hikes, an energy crisis, and quite possibly a food crisis looming on the horizon.
Billionaire investor Stanley Druckenmiller was a guest speaker at CNBC’s Delivering Alpha Investor Summit in New York City on Wednesday, September 28, echoing the day’s worries and pointing to a troublesome future. Druckenmiller’s main thesis revolved around a ‘hard landing in 2023’ but an even more troubling future.
“We’re in deep trouble! Everything I said at the colleges is worse in terms of the metrics, except for one thing, and what I miscalculated was I didn’t calculate zero rates; I used 4% rates. And the only thing that Trump and Clinton agreed on in 2016 is don’t cut social security and don’t cut entitlements.”
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He also added:
“If you look at the reversal, I just talked about, and you use a CBO estimate, which is rates at 3.8%. Which I think, frankly, is pretty optimistic, given all the things we talked about. By 2027 the interest expense alone on the debt eats all healthcare spending.”
What will happen to future generations?
Druckenmiller continued painting a bleak picture where the debt the US has accumulated over the decades is so high that it will eat away at the ability to service future generations of American citizens.
“By 2047, it eats all discretionary spending. We’re now getting into fiscal dominance. By the way, by 2049, it eats all social security. We’re getting to the point now where interest expense on the debt is so high that it’s going to eat our ability to basically service the next generation, and I’m not even sure about the current one.”
Futureproofing next generations
The billionaire investor indicated that today’s troubles would pale compared to what awaits future generations. In the past, such doomsayers were often proven wrong by increased productivity and new wealth creation.
Whether the “green revolution” will help the current and future generations create new high-paying jobs and whether new technologies will help repeat history remains to be seen. For now, caution is warranted on all economic fronts.
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